AMD announced the deal is valued at around $5.4B USD: $4.2B in cash and 57M shares of AMD common stock (valued at a little over $18 USD per share as of July 21, 2006) will be used to purchase the ATI in a takeover bid. A
little more than half of the cash to be used from the transaction will come
from a $2.5B USD loan from Morgan Stanley, which was the bank quoted Saturday when the
news of this story first broke. This is in addition to the $5.8B USD the company plans
to invest in Dresden, Germany over the next three years and the $3.5B USD
slated for a new semiconductor facility in Luther Forest, New York.
ATI was a fabless semiconductor company, meaning the company relied completely
on third-party facilities to manufacture its ASICs. Although AMD certainly will
have semiconductor fabrication, the company is already hard-pressed to keep up
with CPU demand. AMD President Dirk Meyer emphasized that AMD will not use its in-house facilities for ATI semiconductors at this time, especially with the TSMC and UMC opportunities that are already available.

AMD's press release also claims that the combined company would have had
approximately $7.3B in sales over the last four quarters and just under 15,000
employees. The new company keeps the AMD headquarters in Sunnyvale,
California, and the previous ATI headquarters will act as a business hub for
part of the company. ATI's previous CEO Dave Orton will act as executive
vice president of the ATI division and report directly to Hector Ruiz and Dirk
Meyer. AMD's press release indicates that ATI will, for now, act as a division
of AMD. In the event the takeover falls through, ATI must pay AMD a termination fee of $162M to cover AMD's initial investments and lendings. AMD CEO Hector Ruiz also confirmed that there will not be any significant layoffs as a result of the takeover.

The merger is more than a small shakeup for the industry. NVIDIA, AMD's
number one supplier of core logic for AMD platforms, is also a direct
competitor of ATI for discrete and integrated graphics. Jaffar Ali was
able to reach NVIDIA's Director of Product PR EMEA, Luciano Alibrandi, who claims
"Our PC strategy is to be the leading innovator of GPU and core logic for
both Intel and AMD platforms. GeForce is the #1 GPU brand. Quadro is the #1
professional and workstation graphics brand. nForce the #1 core logic brand.
And SLI is the #1 multi-GPU brand. They are specifically sought out by end
users of both Intel and AMD processors. Today's announcement only enhances our
strategy." It appears definite that NVIDIA will approach the Intel
market with much more vigor than in the past, though no NVIDIA representatives
would comment on whether or not the merger will result in a scaling back of
NVIDIA AMD components. AMD President Dirk Meyer added "With regard to GPUs: I fully expect ATI's solutions to compete with NVIDIAs on the AMD platform."

Microsoft had already voiced its opinion in the AMD press release when Jim Allchin, Co-President of Microsoft’s Platforms and Services Division, claimed "We're excited by the potential of what AMD and ATI can deliver together to enhance the Windows Vista experience for our customers even further." Since it may take years for the AMD takeover to really kick into effect, it may take some time for customer-ready products to hit store shelves.

The addition of in-house core-logic also strengthens AMD's presence in the
server market. A portfolio manager for AMD, who wishes to remain nameless
for now, told DailyTech "[I] doubt AMD will have the price flexibility to
bundle ATI chipsets (18% gross margin) until they bring the manufacturing
in-house. Available capacity for that is still down the road." The
same manager went on to claim that without total reliance on Broadcom for
server core-logic the company will have much better success securing major
deals for large quantities of server products. All of these products will now be obtained
through the single AMD channel instead of multiple vendors -- the company previously prided itself in diversification of channel solutions until the Dell picked up AMD to provide server products.

I think most of the GPUs from ATI are the cheap integrated ones in either mobile devices or built into motherboards. Which is good for market share, but apparently not so good for overall revenues. I wonder what the actual profit margins are like for the two companies.

ATI makes a lot of inexpensive, onboard-class solutions, nvidia makes a lot of inexpensive, mid range and high end solutions. The profit margin on mid-to-high-end products is greater, hence more profit. ATI still holds more market share, just not as much revenue.

quote:I think most of the GPUs from ATI are the cheap integrated ones in either mobile devices or built into motherboards. Which is good for market share, but apparently not so good for overall revenues. I wonder what the actual profit margins are like for the two companies.

I think this makes sense. It might be a small market in terms of revenues but now I think AMD has a big opportunity to cash in on the new DX10-accelerated GPU demand in the graphics-integrated chipset market. Once you get your toe in, you can always barge your way through, I guess. Not a bad strategy in my book.

Market Cap: The market price of an entire company, calculated by multiplying the number of shares outstanding by the price per share. here also called market cap or market capitalization.

As anyone who remembers the .com days, right before the bubble burst, market cap is hardly a reliable indicator of a company's size. I do agree that nVidia is the larger company but not because of market caps. I think a better indication of a company's worth is the total value of it's intellectual properties as well as it's revenues and profits.

Nope. I'm not including stocks in there. We all know stocks can be vastly inflated and be worth way more than what the revenues as well as the intellectual properties are worth. Which is why I say the market cap is a bad indicator of a companies net worth. Market cap is partially based on the predictions of how a company will do which as we all know in reality can be much much much much different from the fantasy land that some investors live in. Just ask the .com investors.

Maybe I'm just wording it wrong. I just feel that including stocks in a companies net worth is not that reliable due to the inflation of some stocks beyond what would be reasonable considering what the company makes. I'm probably thinking more in the lines of net assets (since it's a company) with an outlook on how the company is doing by looking at it's revenues and profits.

"Intel is investing heavily (think gazillions of dollars and bazillions of engineering man hours) in resources to create an Intel host controllers spec in order to speed time to market of the USB 3.0 technology." -- Intel blogger Nick Knupffer